Changing The Nature Of Finance

Changing the nature of finance

This could be a year of positive change, for ourselves, for our planet, and for the wonderful creatures which whom we share it.
(Sir David Attenborough – British biologist and filmmaker).

Healthy societies, resilient economies and thriving businesses rely on nature. It is no coincidence that both economy and ecology derive from the Greek word for house ‘oikos’. The World Economic Forum (WEF) Global Risk Report 2020 for the first time in the survey’s 10-year outlook, considers the top five global risks in terms of likelihood are all environmental. The IPBES Global Assessment report in 2019 showed that an estimated 1 million species are under risk of extinction, most of them in the near future. The sharp decline of nature is driven mostly by human actions. We have ten more years to set the record straight and bend the curve of biodiversity decline, but we cannot do this alone.

Through their financing activities and investments financial institutions have an important role to play. They can finance restoration and protection of nature via a number of financial vehicles, and help close the global biodiversity funding gap by developing innovative deals such as debt for nature swaps. But money also has a darker side. In 2019, the world’s largest banks invested more than USD 2.6 trillion – or 5% of global GDP – in sectors which governments and scientists agree are the primary drivers of biodiversity destruction according to research by Bankrolling Extinction.

For a long time impact on biodiversity was a blind spot for financial institutions, who look at the world from their own portfolio and not real world impacts. If you look at a Bloomberg terminal – a software system used by many portfolio managers and brokers – there is still hardly any data on the impact of investments on nature. But there is light at the end of the tunnel. From the EU green deal to the postponed 15th meeting of the Conference of the Parties (COP 15) to the Convention on Biological Diversity (CBD) financial institutions realize that biodiversity loss may be the next system risk to be on the lookout for. And luckily for the establishment of the Partnership Biodiversity Accounting Financials, the Taskforce Nature Related Financial Disclosures, and the Finance for Biodiversity pledge are helping them to embed these risks.

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